David Cameron was dealt a damaging blow by his own party last night as Tory rebels - led by Rochester and Strood MP Mark Reckless - combined with Labour to inflict a bruising defeat on his EU negotiating strategy.
A rebel Commons amendment calling on ministers to demand a real-terms cut in the EU budget was passed by 307 votes to 294 - a 13-vote majority.
An analysis of the division list showed 51 Conservative MPs, plus two tellers, defied the party whips to support the amendment.
The announcement of the result was greeted with loud cheers from the Tory benches.
Although it is not binding - simply requiring ministers to "take note" - the result will embolden Tory Euro-sceptics, threatening to re-open the bitter divisions over Europe which tore apart the party in the 1990s.
One leading Conservative rebel, Peter Bone, hailed what he called a "remarkable victory".
"Parliament spoke for the people," he said. "There was enormous pressure on colleagues to vote with the Government.
"It was a very significant victory for the people. It was because MPs have to face their constituents."
Among ministers, there was fury at the way Labour had, in their view, switched position to outflank the Government on its most vulnerable issue.
For Labour, jubilant shadow chancellor Ed Balls said: "This is a humiliating defeat for David Cameron which shows how weak and out of touch he has become.
"The Prime Minister wanted to say the EU budget should rise in line with inflation, but has been forced by Labour MPs and his own backbenchers to seek a real-terms cut."
With the opposition parties lining up behind the rebel amendment, ministers had been braced for the worst, with No 10 aides briefing from late afternoon - more than two hours before the vote - that they were heading for defeat.
Earlier, at Prime Minister's Questions, Mr Cameron tried to rally his troops, insisting he was taking the toughest line of any British government in the budget negotiations since the UK joined the EU."At best, we would like it cut, at worst frozen, and I'm quite prepared to use the veto if we don't get a deal which is good for Britain," he declared to Tory cheers.
He also rounded on Ed Miliband, saying he supported a massive increase in the EU budget under the former Labour government.
The Labour leader retorted that once again the Tories were weak and divided over Europe.